Across the UK rents are rising amid fierce competition for rental properties.
Lack of stock is becoming a major issue, as tighter legislation and tax changes push some landlords to exit the market after years of low new investment.
Currently there are 20-40% less homes available for renters to live in than there were in 2019.
Yet across the UK, demand for rental properties is now running at 50-85% above normal levels.
How much are rents increasing by?
As renters are all too painfully aware, rents on new lets are up 10.4% year-on-year, and rents have risen by £2,800 over the last 5 years for the average renter.
There are several reasons why rent is increasing right now:
Landlords are facing increased mortgage costs and lenders are stress-testing their ability to repay those mortgages at much higher levels
The shortage of properties is leading some renters to pay more, if they are able to, to secure the property they want to live in
Many tenants are staying in their rental properties to avoid paying higher rents elsewhere, meaning fewer new rentals are coming to market
High immigration is adding to demand, especially in university towns and cities
The levels at which rents are increasing varies across different regions of the UK.
In London, a single renter now pays 40% of their pre-tax income on renting, while in the North East, that figure is closer to 19%
What can you do if your rent increases and you can’t afford the payments?
1. Talk to your landlord
Not all landlords are seeking to increase rents. If you have just moved in and are on a initial fixed term period the rent won't increase.
But if your landlord does ask to increase the rent and you’re worried you can’t afford to pay it, the best thing to do is have an honest and open conversation with them.
Have that conversation in person if you can, or on the telephone.
This subject is too important to discuss on email or via text messages, where sentiments can easily be misinterpreted or misunderstood.
See if you can find a compromise. And try to be understanding of each other.
It could be that your landlord is facing rising mortgage costs and is worried they may have to sell the property if they can’t cover those costs.
Most landlords would rather keep their tenants than risk the property being empty for a month or two, so if there’s a middle ground you can both reach it will be better for everyone.
In Scotland, unlike in England and Wales, the situation is slightly different as rent rises are capped until at least 30 September 2023.
Landlords cannot increase their tenants' rent by more than 3% of their current rent, unless they can prove that there has been an increase in certain costs.
2. Know your rights
For a periodic tenancy (a rolling weekly or monthly contract), your landlord cannot increase your rent by more than once a year without your prior agreement.
For a fixed-term tenancy, your landlord can only increase your rent if you agree.
If you don’t agree, the rent can only be increased when your fixed term ends.
3. Consider moving to a more affordable area
Rents are charged at vastly different rates across the UK. Could you consider moving to a cheaper area, or a smaller property, where the rent might be more affordable?
4. Consider becoming a first-time buyer
Saving for a deposit is the biggest hurdle many renters face when trying to step onto the property ladder
But 100% mortgages are now available for tenants with a strong track record of rental payments who can show they can afford a mortgage.
The new 5-year fixed rate mortgage comes at an interest rate of 5.49% over a maximum term of 35 years.
Discover more in 100% no-deposit mortgages back!
The 95% mortgage guarantee scheme is also running until the end of this year, meaning you don’t need to save up quite so much for a deposit.
How do you secure a rental property when so many people are competing for it?
1. Try to be the first one to view it if possible
If the first viewing is at 4pm, get there for 3.45pm.
2. Be ‘renter ready’
Have your ID with you and bring your proof of residency. (Landlords and agents are eventually going to ask for this, so if you have it with you, you’re already going up the list.)
3. Know what you can afford
Think about your finances and be realistic about what you can afford. The rule of thumb for affordability is that you generally need to earn 2.5 times the monthly rent.
So if the rent is £950 and you multiply that by 30, then you’ll need to earn £28,500 a year.
The credit check referencing companies want to know that you can afford the rent and still have enough money to be able to live. So don’t overstretch yourself.
What would a landlord look for in a perfect renter right now?
Having all your paperwork and documentation in place will help to speed the process up.
But really most landlords simply want someone who’s going to care for the property, be a good neighbour and be able to pay the rent.
Will the current situation in the rental market ease this year?
Unfortunately this is looking unlikely.
The chronic imbalance between the number of homes available for rent and the demand out there for them is likely to keep pushing rents higher across the whole of the UK.
And we’re about to enter the busiest time of the year for renting. In the summer, demand typically increases by 40%.
That said, there is only so much renters can afford to pay and we expect rental growth to slow towards 8% by the end of the year.
However, that is still above the rate of earnings growth, which is currently 6%.
The situation will only ease when there’s an increase in new investment from corporate and private landlords.
And right now, legislative changes and higher mortgage rates are putting the breaks on investment from the latter.